Series 24 Exam Questions with 100%
Correct Answers
Form 144 must be filed with the SEC
concurrently with the sale or earlier.
within 10 days of the sale
5 days before the sale - ANSWER-concurrently with the sale or earlier.
Form 144, which alerts the SEC to the impending sale of unregistered or control stock,
must be filed concurrently with or before the sale. The form must also be filed as
amended if there is an inaccuracy or to indicate a change in broker.
For an additional issue offering where the subject security is quoted by the OTC
Markets Group, the prospectus delivery requirement period is
90 days
60 days
40 days
25 days - ANSWER-40
The prospectus delivery requirement periods in the aftermarket are as follows: for IPOs,
90 days if the security is non-Nasdaq and 25 days if the security is to be listed or quoted
over Nasdaq. For additional issues, there is no requirement to deliver a prospectus in
the secondary market if the security is listed NYSE or Nasdaq. Once the distribution is
complete, there is no further obligation to deliver a prospectus. If the security is non-
Nasdaq OTC, the prospectus delivery requirement period is 40 days.
A company's board of directors has authorized senior management to proceed with a
public offering of senior debt securities. Following submission of the registration
statement, which of the following documents must contain the legend "subject to
completion or amendment"?
red herring
form 144
form t - ANSWER-red herring
,The legend "subject to completion or amendment" must be printed in red on a
preliminary prospectus (red herring). SEC Schedule 14A is filed to provide financial
information and other important procedures for shareholders meetings
All of the following are requirements of a Rule 506(b) offering under Regulation D
except
the sale is limited to a total of 35 investors.
the issue is not advertised to the general public.
all nonaccredited investors are sophisticated - ANSWER-the sale is limited to a total of
35 investors.
In a Rule 506(b) offering, an issuer that is free of "bad actors" can sell to an unlimited
number of accredited investors. However, there can be no more than 35 nonaccredited
investors in any single offering. All investors must receive a copy of the offering
memorandum, and all nonaccredited investors must be sophisticated. In addition,
nonaccredited investors must be permitted to use a purchaser representative to help
them evaluate the investment. Certain advertising, if limited in scope, is permitted.
Advertising to the general public is strictly prohibited. Rule 506(c) prohibits
nonaccredited investors.
A member firm, in return for letting a customer buy shares of a new issue at the public
offering price, requests that the customer buy at least 500 additional shares in the
secondary market within two weeks of the issuer's effective date. This action is
permitted
prohibited - ANSWER-prohibited
Tie-in arrangements are considered fraud under the Act of 1934 and are strictly
prohibited.
Which of the advertising or sales promotion activities described below would be
permitted in conjunction with a Rule 506(b) private placement
Blanket mailing of a magazine reprint sent by a broker-dealer to all of the firm's
customers that is highly favorable to the issuing corporation
Announcement of a private placement and invitation to attend an investment information
meeting sent to a select group of institutional investors - ANSWER-Announcement of a
private placement and invitation to attend an investment information meeting sent to a
select group of institutional investors
The SEC's rule centers on keeping private placements out of the general public's view.
Any advertisement or promotion that solicits buying interest in private placement
,securities and can be freely seen or read by average investors violates SEC rules
governing the terms under which these distributions are permitted.
Under SEC rules, all of the following would be considered accredited investors except
an individual with annual income of $500,000 for the last two year with an expectation of
continued earnings at that level.
an officer of the issuer with annual income of $100,000.
an individual with a personal net worth of $200,000. - ANSWER-an individual with a
personal net worth of $200,000.
Under SEC rules, an accredited investor is an institution, an individual with annual
income of $200,000 or more (with an expectation of continued earnings), an individual
with a net worth of $1 million or more, exclusive of the net equity of their primary
residence, or any officer or director of the issuer. In joint accounts, the income threshold
is $300,000.
Under SEC Rule 10b-13, all of the following would be prohibited from tendering shares
except
an investor long call options
an investor long stock.
an investor short against the box.
an investor short stock - ANSWER-an investor long stock.
To tender stock, a customer must be long the stock. Being long call options does not
satisfy this requirement unless the customer has issued exercise instructions. If a
customer is short against the box, the customer's net position is zero.
Regulation A requires an underwriting broker-dealer to furnish an offering circular to
purchasers
concurrently with the mailing of the customer confirmation.
24 hours before the confirmation.
24 hours before the confirmation. - ANSWER-24 hours before the confirmation.
Regulation A requires that an offering circular be provided to purchasers at least 48
hours in advance of sales.
, A public reporting company is looking to offer securities privately under a safe harbor
exemption found in Regulation D Section 506(b). Which of the following statements is
most accurate regarding this planned offering
There is no limit to the number of nonaccredited investors who may participate.
"Bad actors" may not rely on the safe harbor.
General solicitation is acceptable. - ANSWER-"Bad actors" may not rely on the safe
harbor.
Felons and other bad actors may not rely on the Rule 506 safe harbor. In 2013, the
SEC adopted the bad actor disqualification for Rule 506 of Regulation D under the
Securities Act of 1933. A bad actor may not rely on either Rule 506(b) or 506(c) of
Regulation D if the issuer or any other person covered by the rule has a relevant
criminal conviction.
Under SEC rules, Form 8-K must be filed
within 10 business days of the event.
promptly
within 4 business days of the event. - ANSWER-within 4 business days of the event.
Form 8-K is used to report newsworthy events to the SEC. The reporting time limit is
four business days.
A member firm receives an order from an investment adviser to purchase shares in a
common stock IPO. Under FINRA Rule 5130, the member must
obtain a representation from the conduit that the purchaser is not a restricted person.
refuse to accept the order.
obtain a list of all of the adviser's clients to determine eligibility. - ANSWER-obtain a
representation from the conduit that the purchaser is not a restricted person.
When receiving an order to buy a new equity issue from a bank, investment adviser, or
other conduit, a member must obtain a representation from the conduit that all
purchasers are in compliance with FINRA Rule 5130 (i.e., they are not restricted
persons).
A broker-dealer selling a block of restricted securities for an insider pursuant to Rule
144 may engage in which of the following activities?
Correct Answers
Form 144 must be filed with the SEC
concurrently with the sale or earlier.
within 10 days of the sale
5 days before the sale - ANSWER-concurrently with the sale or earlier.
Form 144, which alerts the SEC to the impending sale of unregistered or control stock,
must be filed concurrently with or before the sale. The form must also be filed as
amended if there is an inaccuracy or to indicate a change in broker.
For an additional issue offering where the subject security is quoted by the OTC
Markets Group, the prospectus delivery requirement period is
90 days
60 days
40 days
25 days - ANSWER-40
The prospectus delivery requirement periods in the aftermarket are as follows: for IPOs,
90 days if the security is non-Nasdaq and 25 days if the security is to be listed or quoted
over Nasdaq. For additional issues, there is no requirement to deliver a prospectus in
the secondary market if the security is listed NYSE or Nasdaq. Once the distribution is
complete, there is no further obligation to deliver a prospectus. If the security is non-
Nasdaq OTC, the prospectus delivery requirement period is 40 days.
A company's board of directors has authorized senior management to proceed with a
public offering of senior debt securities. Following submission of the registration
statement, which of the following documents must contain the legend "subject to
completion or amendment"?
red herring
form 144
form t - ANSWER-red herring
,The legend "subject to completion or amendment" must be printed in red on a
preliminary prospectus (red herring). SEC Schedule 14A is filed to provide financial
information and other important procedures for shareholders meetings
All of the following are requirements of a Rule 506(b) offering under Regulation D
except
the sale is limited to a total of 35 investors.
the issue is not advertised to the general public.
all nonaccredited investors are sophisticated - ANSWER-the sale is limited to a total of
35 investors.
In a Rule 506(b) offering, an issuer that is free of "bad actors" can sell to an unlimited
number of accredited investors. However, there can be no more than 35 nonaccredited
investors in any single offering. All investors must receive a copy of the offering
memorandum, and all nonaccredited investors must be sophisticated. In addition,
nonaccredited investors must be permitted to use a purchaser representative to help
them evaluate the investment. Certain advertising, if limited in scope, is permitted.
Advertising to the general public is strictly prohibited. Rule 506(c) prohibits
nonaccredited investors.
A member firm, in return for letting a customer buy shares of a new issue at the public
offering price, requests that the customer buy at least 500 additional shares in the
secondary market within two weeks of the issuer's effective date. This action is
permitted
prohibited - ANSWER-prohibited
Tie-in arrangements are considered fraud under the Act of 1934 and are strictly
prohibited.
Which of the advertising or sales promotion activities described below would be
permitted in conjunction with a Rule 506(b) private placement
Blanket mailing of a magazine reprint sent by a broker-dealer to all of the firm's
customers that is highly favorable to the issuing corporation
Announcement of a private placement and invitation to attend an investment information
meeting sent to a select group of institutional investors - ANSWER-Announcement of a
private placement and invitation to attend an investment information meeting sent to a
select group of institutional investors
The SEC's rule centers on keeping private placements out of the general public's view.
Any advertisement or promotion that solicits buying interest in private placement
,securities and can be freely seen or read by average investors violates SEC rules
governing the terms under which these distributions are permitted.
Under SEC rules, all of the following would be considered accredited investors except
an individual with annual income of $500,000 for the last two year with an expectation of
continued earnings at that level.
an officer of the issuer with annual income of $100,000.
an individual with a personal net worth of $200,000. - ANSWER-an individual with a
personal net worth of $200,000.
Under SEC rules, an accredited investor is an institution, an individual with annual
income of $200,000 or more (with an expectation of continued earnings), an individual
with a net worth of $1 million or more, exclusive of the net equity of their primary
residence, or any officer or director of the issuer. In joint accounts, the income threshold
is $300,000.
Under SEC Rule 10b-13, all of the following would be prohibited from tendering shares
except
an investor long call options
an investor long stock.
an investor short against the box.
an investor short stock - ANSWER-an investor long stock.
To tender stock, a customer must be long the stock. Being long call options does not
satisfy this requirement unless the customer has issued exercise instructions. If a
customer is short against the box, the customer's net position is zero.
Regulation A requires an underwriting broker-dealer to furnish an offering circular to
purchasers
concurrently with the mailing of the customer confirmation.
24 hours before the confirmation.
24 hours before the confirmation. - ANSWER-24 hours before the confirmation.
Regulation A requires that an offering circular be provided to purchasers at least 48
hours in advance of sales.
, A public reporting company is looking to offer securities privately under a safe harbor
exemption found in Regulation D Section 506(b). Which of the following statements is
most accurate regarding this planned offering
There is no limit to the number of nonaccredited investors who may participate.
"Bad actors" may not rely on the safe harbor.
General solicitation is acceptable. - ANSWER-"Bad actors" may not rely on the safe
harbor.
Felons and other bad actors may not rely on the Rule 506 safe harbor. In 2013, the
SEC adopted the bad actor disqualification for Rule 506 of Regulation D under the
Securities Act of 1933. A bad actor may not rely on either Rule 506(b) or 506(c) of
Regulation D if the issuer or any other person covered by the rule has a relevant
criminal conviction.
Under SEC rules, Form 8-K must be filed
within 10 business days of the event.
promptly
within 4 business days of the event. - ANSWER-within 4 business days of the event.
Form 8-K is used to report newsworthy events to the SEC. The reporting time limit is
four business days.
A member firm receives an order from an investment adviser to purchase shares in a
common stock IPO. Under FINRA Rule 5130, the member must
obtain a representation from the conduit that the purchaser is not a restricted person.
refuse to accept the order.
obtain a list of all of the adviser's clients to determine eligibility. - ANSWER-obtain a
representation from the conduit that the purchaser is not a restricted person.
When receiving an order to buy a new equity issue from a bank, investment adviser, or
other conduit, a member must obtain a representation from the conduit that all
purchasers are in compliance with FINRA Rule 5130 (i.e., they are not restricted
persons).
A broker-dealer selling a block of restricted securities for an insider pursuant to Rule
144 may engage in which of the following activities?
